CAS Exam 7 Spring 2012, Question 7
Study guide: Exam 7
For a set of retrospectively rated workers compensation policies, the following factors apply:
- Basic premium factor: 0.20
- Loss conversion factor: 1.25
- Tax multiplier: 1.04
There will be three retrospective adjustments, with the following estimated factors:
| Retro Adjustment Period | % Loss Emerged | Loss Capping Ratio |
|---|---|---|
| First | 75.1% | 0.93 |
| Second | 19.5% | 0.72 |
| Third | 5.4% | 0.55 |
Also assume:
- Total expected unlimited loss for these policies is $205,000,000.
- The expected loss ratio is 75%.
- Total current booked premium is $220,000,000.
- None of the policies has yet had its first retro adjustment.
Estimate the retrospective premium asset for this set of policies.
Part a (3 points)
Answer this question and see the worked solution